Quick disclaimer: I’m not an avid skydiver. I also don’t go base jumping in a squirrel suit every weekend. Hell, I don’t even own a mountain bike. None of this stopped me, however, from purchasing a GoPro camera recently.
What started out as a straightforward trip to Best Buy to pick up the absolute cheapest GoPro Hero3+ camera possible ($199 White Edition), quickly turned into an acquisition that sucker punched my checking account and shook me down an extra $200 for the top-of-the-line model ($399 Black Edition). So how did GoPro convince a cheapskate like me to spend even more money for something I didn’t initially even want?
Compelling, effective pricing - that’s how. Let’s jump into action, taking a quick look at what GoPro knows about pricing to demonstrate how you can improve your own pricing strategy by following their lead.
photo credit: rawmeyn via Compfight
1. Product Versioning Widens The Appeal Of Your Offering
This seems pretty obvious, but it’s all too common for companies to offer only one “best version” of their product or service. The problem is, that leaves prospective customers with only one option - take it or leave it. Conversely, offering several versions of your product or service ensures that you attract a wider audience of prospective customers (with varying price sensitivities). If GoPro only sold the Hero3+ Black Edition for $399, I would have never considered making the trip to Best Buy in the first place. The price tag would have been way too hefty without an understanding of the product to lower the barrier to entry.
What GoPro Knows: Versioning Helps Customers Measure Value Incrementally
Giving prospective customers the choice between three versions of its popular camera (White, Silver, and Black Editions) not only extends GoPro’s reach - it gives would-be buyers the context for how much something should cost. Humans are notoriously bad at randomly assigning value to products we don’t know much about. This novel concept has propped up The Price Is Right game show franchise for almost half a century. Providing additional versions creates a framework for customers to compare and contrast the value of each version relative to the others (for more on product and price differentiation, take a look at this post).
2. Narrow The Gap In Price, Boost the Value
GoPro expertly manages concerns about price by closing the price gap between models in a simple but effective way. The premium Black Edition is the only package that includes a Wi-Fi remote (i.e, you don’t have to physically be holding the camera to hit “record”). Interested in purchasing the Wi-Fi remote for your cheaper, Silver Edition ($299) camera? That’s cool. It will cost you an additional $80.
Wait, what? The inclusion of the Wi-Fi remote essentially narrows the gap in price between the top two models to only $20. At this point, Black Edition appears to be a tremendous value as bonus features such as 4K resolution, SuperView mode, Auto Low Light Mode, and extra megapixels are included for only $20 more.
What GoPro Knows: Communicating Value is Crucial
It’s easy to opt for the cheapest version of a product when the difference in cost seems astronomical. It’s much more difficult, however, to make a decision when the perceived value exceeds the price difference. The Oracle of Omaha, Warren Buffet, articulated this intersection of price and value when he notoriously quipped, “Price is what you pay, value is what you get.” In short, even price sensitive customers might be willing to pay more if you can clearly demonstrate the value of your premium product.
3. Pricing Isn’t Arbitrary, It’s Strategic
Nothing about GoPro’s pricing tiers is arbitrary. Each scales logically along a prescribed set of value metrics and features. For GoPro, these are megapixels, fps burst rates, and video resolution - with each tier more advanced than the previous. Each of these distinctions helps paint a picture that the higher priced tiers are “worth it” for X, Y, and Z reasons.
GoPro also isn’t afraid to make its entry-level White Edition camera “lite” in some areas to add further contrast. As an example, the White Edition only offers 5 MP for photo - arguably weak by 2014 standards. In the mind of a customer, this feature distinction alone could be reason enough to purchase the more expensive Silver or Black Edition cameras (at 10 MP or 12 MP respectively).
What GoPro Knows: Proper Pricing Is Powerful
Actual feature differentiation between plans is essential if you expect customers to purchase the higher priced plans en masse or upgrade to them as their needs grow. Failing to create meaningful differences between products and plans will give customers very little incentive to buy your premium, high margin offerings.
Want to get a better grasp on value based pricing? Download our Pricing Strategy eBook or take a look at our No Bull, Straightforward Guide to Value Based Pricing.
If you'd rather dive into pricing page best practices, check out our latest eBook, The SaaS Pricing Page Blueprint, which offers in-depth data and analysis on building the perfect pricing page.